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More complex economic question.

  1. Nov 24, 2005 #1
    What would you assume the shape of the demand curve for a drug like heroin would be? Certainly the demand for an addictive drug like that would be inelastic as a whole. However, it seems to me that beyond the market value that has been settled at, that the elasticity of demand would increase until it became wholy inelastic. But that's only beyond the market price.

    My logic is that, of course, people will be willing to pay almost whatever it costs to use heroin once they're addicted. So, prices will be competed up to a very high level straight off the bat. But they have to settle somewhere. There has to be a point beyond which even heroin addicts will be unable to buy heroin. So there is some limit. The fact that there is a settled market price should show that. It seems obvious that certain dealers should try to raise their prices above market price periodically, and the reason that these new prices don't set in as the market price is that the other dealers will under-cut them. If it were profitable for every dealer to raise up their prices, then they would do that. But that there's a settled market price would indicate there's a reason that the price isn't higher; namely that the price elasticity of demand begins to grow and become elastic.

    Does that make sense, or would others think that heroin's price could go up indefinately with a constant increase in total revenue?
  2. jcsd
  3. Dec 1, 2005 #2
    It would be interesting to see what the average salary of a heroin addict is. The price can't go indefinately up, sooner or later the addicts run out of money and can't pay, thus the dealers won't make anything.

    check this out
  4. Dec 1, 2005 #3
    Let's assume heroin addicts have a pefectly inelastic demand to keep things simple. Your right, even heroin as a scarce commodity faces a market price. The only way for a dealer to raise prices would be if the supply of all heroin was somehow decreased, which in the picture would be a shift of the entire supply curve. A dealer could try to raise their price, but this would just be a movement along the original supply curve, not an entire shift. Movement away from the market equilibrium only results in inefficient allocation of resources. Dealers would not be making maximum profit if they chose to raise the price of their heroin more than what the market dictates. You can clearly see why now some people argue that the war on drugs is a waste of time. Whenever vasts amount of illegal drugs are confiscated by a government agency, supply cuts back resulting in higher market prices which encourages only more people to start selling drugs.
    Last edited: Dec 1, 2005
  5. Dec 1, 2005 #4


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    Having known both heroin addicts and heroin dealers (our high school class president, is serving a life term for heroin dealing, that last sentence was not his first). His mother ended up selling her house, her car and all of her furniture to bail him out each time, she borrowed all of the money she could and each time he went back to dealing. He totally destroyed his mom.

    I don't know currently, but heroin prices in the past remained rather stable. Methadone was created to help junkies (heroin addicts) kick the habit and became another just as abused illegal substance. Heroin addicts would steal, borrow, beg, prostitute, steal their kids welfare money, whatever it took to get the next fix. True junkies were rarely ever able to hold steady jobs.

    Ever watched a junkie shoot up? Watch them tie themselves off? Watch them boil it down in a spoon over a flame, using an old much used syringe? See them shake uncontrollably when it hits, their eyes roll back in their heads, the spit on their lips? Oh, it's just lovely. Then the vomiting starts. I've known two people that choked to death on their own vomit. One was a 17 year old girl at a party, she started vomiting in bed with her boyfriend, so he kicked her off the bed with his feet. She landed on the floor next to the bed face up while vomiting and inhaled all of her own vomit and it suffucated her.
  6. Dec 1, 2005 #5

    I remember in highschool I seeing a slide show of heroin addicts' bodies. A lot of them would buy antibiotics on the street because they would get infection from using dirty needles. They then would contract drug resistant infections that would basically become a huge infection over large parts of their bodies, even eating away at their flesh. I remember seeing slides of the rotten flesh on heroin addicts. It wouldn't matter to the addicts though, they would still lift up the rotted parts of their flesh and inject themselves in tissue that was still good. They even would stick themselves inbetween their toes and fingers and even in their penises.
  7. Aug 9, 2006 #6
    you should read "a theory of rational addiction" by gary becker and Kevin Murphy.
  8. Aug 23, 2006 #7
    I think you're missing the most important feature of heroin. When addicts run out of money, they commit whatever crime they need to in order to get the money. Theft, extortion, prostitution, murder, anything. The costs can skyrocket very easily and indefinitely, especially considering what some may regard as indefinite costs of human life.

    That's a very interesting graph. I think it's illustrating a shift to the right of the supply curve, lowering the equilibrium price and raising quantity supplied over time.

    The demand curve for heroin will be negatively sloped, like any demand curve, due to the law of demand. However, unlike other demand curves, It would be concave to the origin (more elastic on the left side, with low quantity supplied and high prices, and more inelastic on the right side, with high quantity supplied and low prices). Demand curves are normally convex to the origin, but heroin is not. This is because heroin is not a normal good.

    -- Edit: This thread is older than my grandmother, pezze! :smile:
    Last edited: Aug 23, 2006
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